New Horizons Un-Limited Inc.

Home Buying Guide for People with Disabilities: Financial Considerations and Options

March 31, 2002 [Updated July 31, 2012]

Financing a home purchase is often the greatest obstacle preventing people with disabilities from home ownership. People with disabilities face unique needs and issues such as poor or no credit histories and fixed or limited income which restricts their ability
to save money for downpayments, closing costs, costs of maintaining a home or making access modifications or repairs.

The purpose of this guide is to provide information for people with disabilities who are 18 to 59 years of age, and does not necessarily offer information specifically for the elderly.

New Horizons Un-Limited assumes no responsibility in guaranteeing the services, programs or conditions as described. If you are interested in a resource listed below, call or contact the resource to verify the current situation. Evaluate information and make your own decisions when using this guide.

Following is a quick outline of this guide, click on the link to go directly to the section of your choice.

Chapter 2 describes assembling a planning team to help in every phase of the home-buying process and to provide ongoing support to the new homeowner. They provide a detailed example of one successful homebuyer's experiences using this approach.

While there are flexible mortgage programs available to homebuyers with disabilities, your credit score will still be considered.

Your first step should be to request your credit report from each of the three consumer credit reporting companies - Equifax, Experian and TransUnion.

Under the Fair and Accurate Credit Transactions Act you are entitiled to receive one free copy of your credit report each year. To simplify the process of obtaining your report from each company, Equifax, Experian and TransUnion have created a website, AnnualCreditReport.com, through which you can securly request and view your credit report online.

If you prefer to contact each credit reporting company separately, you may call:

Equifax, 1-800-685-1111

Experian, 1-888-397-3742

TransUnion, 1-877-322-8228

Your credit score will range from 300 to 850. Typically, a person with a credit score of 620 or lower is considered a credit risk.

If you have had past, serious credit problems you must take steps to repair your credit score before applying for a mortgage. While increasing your credit score will take time and require an ongoing effort from you, you can see quick improvement by paying down your past debt and by successfully disputing negative information on your credit report.

One issue that may arise is that you have not established a traditional credit record through the payment of credit cards or traditional (bank-provided) loans.

The Federal Housing Administration (FHA) has long permitted mortgage lenders to establish a borrower's credit history through nontraditional means, including the compilation of performance on rental payments, utility bills, telephone and cellular phone services, cable television service, payments to local stores, etc.

Such records must typically track payments for no less than 12-months and must be supplemented by at least three credit references/ payment verifications from your landlord, utility company, cable company, home telephone provider, etc.

There are both one-time (upfront) and ongoing expenses that you must consider when purchasing a home. You should consider creating a budget that details both your monthly income as well as current and future expenses. You can download a Personal Budget Worksheet template from Microsoft Office Online.

Upfront Expenses

Closing Costs - includes appraisal fees, lender fees and title company fees (typically several thousand dollars)

Earnest Money - a deposit that binds the buyer to the offer (typically $500-$1000)

Prepurchase Home Inspection ($250 - $1000)

Required Downpayment - generally 3% of the purchase price, though some loans do not require a downpayment

Of course with homeownership also comes the responsibility of home repair and maintenance. You must consider how you will pay for repairs should problems arise down the road. While your home inspection should uncover any major items in need of repair (and the cost of these repairs can be factored into the purchase offer), the small things can add up. Make certain you have left enough room in your budget to pay for unexpected repairs.

The rule of thumb is that your mortgage payment (including property taxes and mortgage insurance) should be no more than 30% of your gross monthly income. Using a simple example - if your monthly income is $1000, your total mortgage payment should not exceed $300. This number will then determine a comfortable home price range. Before looking for homes that may be out of your price range, speak to a lender to determine exactly how much house you can afford.

While only a lender will be able to give you an accurate number, you can use an online payment calculator to get a general idea of what you might be able to afford. Bankrate.com offers Mortgage Calculators that can help you determine your monthly payment based upon a mortgage amount as well as tell you what you may be able to comfortably afford based on your annual income.

While there are programs that offer limited assistance to homebuyers with disabilities for downpayments and monthly mortgage expenses, you must be realistic in your expectations. Even with assistance, you will have a mortgage payment that will be your responsibility and that must comfortably fit into your budget.

While the recent subprime lending crisis has caused a severe pullback of lending to low-income borrowers, there are programs that continue to target homebuyers with disabilities.

One such lending program is the Fannie Mae Home Choice Program. HomeChoice is a mortgage program available to low- and moderate-income people who have disabilities or who have family members with disabilities living with them. HomeChoice mortgages offer flexibility in down payments, qualifying debt-to-income ratios, and credit history. Unfortunately Fannie Mae does not offer a list of lenders and you must ask your local lenders if they sell or service the Fannie Mae products of community HomeChoice mortgages.

Additional information about the Fannie Mae Community Home Choice Program, is available via:

Fannie Mae at (800) 732-6643.

Community HomeChoice (Note: This document was published in October 2003 and may not reflect the current conditions of this program. Please see your local lender for current conditions.)

An offshoot of the Section 8 Housing Choice Voucher Program, the Home Ownership Voucher Program allows you to use what was your rental voucher to either receive monthly assistance towards your mortgage payment or a single grant to be used towards your downpayment.

This and other HUD programs are administered through Public Housing Authorities (PHA). As this program is not mandated, not all Public Housing Authorities participate in the program. Contact your local PHA to learn if they offer Home Ownership Vouchers.

Following are a few more details of the program.

Existing or new Section 8 vouchers can be used. (Though, if you do not currently have a Section 8 Rental Voucher, the waiting list for a voucher can be years long.)

The home can be purchased by a cooperative. One or two family members hold membership shares in the cooperative. Non-profit groups can help in acquiring accessible housing for persons with disabilities under a cooperative.

If you decide later homeownership is not for you, the Section 8 voucher may be switched back to a rental voucher.

The home you buy can be a duplex and one can rent out the second unit.

Municipalities can offer federal grant monies for low income home ownership. Contact your city hall.

Neighborhood Stabalization Program Grants

The Neighborhood Stabilization Program (NSP) was established for the purpose of stabilizing communities that have suffered from foreclosures and abandonment. NSP funds can be used to help homebuyers purchase homes, but they must contact an NSP grantee for application details. NSP operates on a national scale, but participation requirements may differ from one state or city to another. For information on how you may purchase a home with NSP assistance, please contact an NSP grantee in your area. To view grantees by state, see NSP Grantee Contacts page for details.
If you would like additional information on the program please use this form to contact a HUD NSP Representative.

The US Department of Housing and Urban Development (HUD) sponsors housing counseling agencies throughout the country that can provide advice on buying a home as well as information on local financial assistance programs. Visit the HUD website to locate a Local Housing Counseling Agency.

HFAs are state-chartered authorities established to help meet the affordable housing needs of the residents of their states. While programs vary greatly from one HFA to the next, many offer a variety of home buyer programs, which can range from forgivable loans for downpayments to flexible fixed-rate mortgages. Visit the National Council of State Housing Agencies to locate your Local Housing Finance Agency.

Individual Development Accounts (or IDAs) are special matched savings accounts designed to help low-income individuals and families establish a pattern of regular savings and, ultimately, purchase a productive asset. Savings and match money may be used toward the purchase of a home. IDAs are unique in that every dollar an individual deposits into an IDA is matched.

One requirement of the IDA is that deposits must be made from earned income. In many cases, disability and social security payments are considered income and can be used to build up an IDA.

SSI and SSDI beneficiaries must be very careful when utilizing IDAs to save, as their savings could disqualify them from receiving future benefits. You will want to make certain that your IDA is funded by Temporary Aid to Needy Families (TANF) or the Assets for Independence Act (AFIA), as assets saved in these IDAs are not counted. It is very important that you make your IDA provider aware that you are receiving federal benefits. To learn more about how an IDA could impact your benefits, read the 2002 Federal IDA Briefing Book: How IDAs Affect Eligibility for Federal Programs.

In some states, property taxes can amount to as much as 20-30% of your total mortgage payment. What's more, property taxes are adjusted on an annual basis, making your monthly mortgage payment that much more.

Homestead Exemptions/Credits

To help home owners keep their property tax liability affordable, many states offer Homestead Exemptions. An exemption removes part of the value of your property from taxation and lowers your taxes. For example, if your home is valued at $100,000 and you qualify for a $20,000 exemption, you pay taxes on your home as if it was worth only $80,000. That could result in a several hundred dollar savings, depending upon your municipalities tax rate.

Each state program varies widely on how they determine exemptions as well as to whom the exemption is available. Often times however, homeowners with disabilities will qualify for such an exemption. To learn more about the homestead exemption available in your municipality, contact your State's Department of Revenue.

Property Tax Circuit Breaker

While Homestead Exemptions can be made available to home owners at all income levels, the Circuit Breaker credit is strictly available to low-income homeowners. Property tax credits or refunds are typlically offered to homeowners whose property taxes exceed a certain percentage of their incomes. Home owners can receive benefits valued at anywhere from $200 to $2000 depending upon the state.

Contact your State Revenue Department to learn if your state offers this program.

For individuals with physical disabilities, home buying can be an even more difficult process, as many homes are not designed for people who use wheelchairs, scooters, walkers, etc. Often times homes must be modified to accommodate such needs. While grants are sometimes available via local government and non-profit programs, most modifications will need to be paid for via a loan. Following are a few programs that may provide such funding.

The FHA 203(k) Loan, while designed to provide funds for "fixer-uppers", can also be used to make improvements for accessibility. Homebuyers must be approved for this special mortgage through an approved mortgage lender.

Rebuilding Together, via their Safe & Healthy Homes Initiative, makes modifications to homes of individuals with disabilities for FREE. Modifications may include an entrance ramp, widened doorways, installation of grab bars, and lowered cabinets, among others. For more information, visit their website or call their National Headquarters at 1-800-473-4229.

Often times new homeowners underestimate the cost of heating and cooling their new home. As homes are much larger than most aparments, it is important to factor in a higher amount into your budget. It is possible however to have a portion of your energy and utility bills paid for via a federal energy assistance program.

Via the Low-Income Energy Assistance Program (LIHEAP), low-income homeowners can receive help in paying their winter heating or summer cooling bills. Eligibility is limited to low-income households that show an "energy burden." Weatherization assistance (i.e. installation of energy-efficient windows, weather stripping, insulation, etc.) is also available. To learn more, visit the LIHEAP national directory or call the National Energy Assistance Referral (NEAR) project toll-free at 1-866-674-6327.

The lender is going to require some of the following insurance when you purchase a home.
If the lender requires the insurance, they will probably add this to your
monthly mortgage payment amount and hold the money in an escrow account. In the case of homeowner's insurance, you are responsible for
acquiring the policy, reviewing the policy for adequate coverage and paying for the policy,
although the lender may require you to pay the actual yearly payment from your escrow account.

Homeowner's Insurance

Homeowner's insurance combines protection against damage to your property, house and its belongings and protects against claims of negligence or inappropriate action concerning the property that would result in someone else's injury or damage to someone else's property. The lender may ask for proof of this insurance or will collect from you during the year in your monthly mortgage payment and will put a portion of each payment for this insurance in an escrow account. This insurance is usually required by the lender to protect their investment, however, acquiring the insurance, the terms of the insurance, reviewing the terms for adequate coverage and paying for the insurance will be your responsibility.

Flood Insurance

This insurance may not be necessary and does not come standard on a homeowner's insurance policy.
This insurance protects the homeowner against loss from flood, thawing and hurricanes. If the house is located on a flood plain, the lender will require this insurance before approving a loan. The Federal Emergency Management Agency (FEMA) defines flood zones on their maps.

Mortgage Insurance

This insurance protects the lender against loss if the borrower were unable to make their monthly payment and defaults completely on their mortgage loan. If you as borrower can only make less than 15-20% downpayment for the mortgage loan, the lender my require this insurance. The 203(k) FHA mortgage insurance program helps the homebuyer to purchase and rehabilitate a house with a single mortgage loan.

Mortgage life, disability or unemployment insurance

This insurance is term life insurance that diminishes over time as you pay off your mortgage. This insurance will pay off the
remainder of the mortgage if you die and pay a certain number of monthly payments if you become disabled or unemployed.
If you are disabled or unemployed prior to seeking mortgage pre-approval, this insurance would not be reasonable to purchase.

Title Insurance

This insurance protects the lender against any claims that may come up about who legally owns the property. This insurance is also available for the homebuyer. A title search will check the public record to be certain the seller is the legal owner of the property and discover any liens or claims against the property. Ask your lender if this insurance will be necessary.

Personal Property Insurance

Personal property is usually covered from theft on your homeowner's insurance. Check the conditions under your
homeowner's policy for coverage of theft of household goods. If you wish to cover your household goods during moving or storing in a self-storage facility,
you may want to check out this insurance.

Mortgage Loan.com offers a comprehensive guide to housing and mortgages for people with disabilities: Housing and Mortgages for People with Disabilities. There is an audio version of the guide available at the top of the page. This guide covers terminology, how to get started, the process of buying a house, knowing your rights, and programs for financial assistance and how they work. Mortgage Loan.com offers a housing calculator.

The preceding guide has been derived from the
following sources:
"Getting the Money," by Jillian K. Beiberg, On Magazine."Going It Alone, Chapter 6 - Best Practices: Systematic and Strategic Approaches to Rental and Homeownership Opportunities for People with Disabilities."
"Homeownership and Section 8 Voucher" by Lee Schulz, Breaking Away, v. 22 #3, Fall 2001, IndependenceFirst."Hunt for
the Elusive Accessible Apartment" by Lori Hungate.
"Mortgage info just a click away," Milwaukee Journal Sentinel, Milwaukee, Wisconsin, Nov. 9, 1999.
"Owning A Home of Your Own, Expanding Our Thinking on Housing Choice" by Charlene Dwyer and Jerry Vogt, EBTIDE, Inc.
"Trusts and Home Ownership," Opening Doors, December issue,
1998.
"User Friendly,
Homes for the Disabled" by Broderick Perkins.

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